Luminar: Riskier world and shares repurchase
Nov-2021 (Q3 data)
The Story
This is my take on Luminar's value after the update to the riskfree rate and the share repurchase by the company.
The Assumptions
Base year Years 1-4 Years 5-10 After year 10 Link to story
Revenues 35.71%➡115.86% 80.10%➡3.49% 1.55% Grows according to the guidance but -10% in 2030 to account for the narrative change due to semiconductor crisis. Risk-free rate for the terminal year.
Operating margin (471.08%) (297.74%)➡36.65% 37.86%➡18.95% 18.00% Grows according to the guidance up to 2025, then falls back to 3rd quartile of mature Semiconductors firms in stable growth.
Tax rate 27.00% 27.00% 27.00% 27.00% Marginal tax rate according to 2021 KPMG data.
Reinvestment Sales/Capital = 1.03 ➡ 0.71 36.10% Median sales/capital of all Semiconductors firms to the median of mature Semiconductors firms.
Cost of Capital 2.56%➡3.14% 3.33%➡4.29% 4.49% Moving towards Auto Parts industry average on a 2% riskfree rate.
The Cash Flows
Revenues Operating Margin EBIT EBIT (1-t) Reinvestment FCFF Implied ROIC
Base year (2021) $22 (471.08%) ($103) ($103) (31.76%)
1 (2022) $30 (297.74%) ($89) ($89) $8 ($97) (26.72%)
2 (2023) $84 (109.44%) ($92) ($92) $54 ($146) (23.72%)
3 (2024) $331 4.98% $17 $17 $258 ($241) 2.56%
4 (2025) $715 36.65% $262 $262 $416 ($154) 24.70%
5 (2026) $1,288 37.86% $488 $434 $645 ($212) 25.41%
6 (2027) $2,090 34.07% $712 $520 $941 ($421) 19.64%
7 (2028) $3,103 30.29% $940 $686 $1,240 ($554) 17.65%
8 (2029) $3,936 26.51% $1,043 $762 $1,067 ($305) 15.37%
9 (2030) $4,430 22.73% $1,007 $735 $662 $72 13.09%
10 (2031) $4,584 18.95% $868 $634 $218 $416 10.87%
Terminal year $4,655 18.00% $838 $612 $221 $391 4.29%
The Value
Terminal cash flow $391
Terminal cost of capital 4.49%
Terminal value $13,311
PV (Terminal Value) $9,505
PV (CF over next 10 years) ($1,459)
Sum of PV $8,046
- Adjustment for distress $724 Probability of failure: 10.00%
- Debt & Minority Interests $262 Based on Ba1 rating from Moody's
+ Cash & Other Non-operating assets $546
Value of equity $7,606
- Value of equity options $266
Number of shares 344.54 million
Value per share $18.48 Stock was trading at $14.75
In millions USD except Value-per-share.